Our asset swap with E.ON has turned us into one of the world’s leading renewable energy companies. We are now an all-rounder in electricity generation at the forefront of creating a sustainable energy system. In addition, we will ensure security of supply with our flexible power plants. RWE aims to become carbon neutral by 2040. To this end, we will invest billions in wind energy, photovoltaics and storage technologies, enter the green hydrogen production business, and phase out electricity generation from coal. In doing so, we are playing our part in achieving the Paris climate goals, as officially confirmed by the independent Science Based Targets Initiative at the end of 2020.
Transformation into a specialist in sustainable power generation and energy trading
Our company has changed fundamentally over the last few years. In the past, RWE was an integrated utility, which was active along the entire energy value chain. Now, we are a company specialising in power production and energy trading that wants to drive the transformation of the energy sector, aiming for more sustainability. Our goal is carbon-neutral electricity supply that is both secure and affordable.
New segment structure introduced in 2020
Our main business, electricity generation, is now broken down by energy source, whereas energy trading is still presented separately. This results in the following five segments: (1) Offshore Wind, (2) Onshore Wind / Solar, (3) Hydro / Biomass / Gas, (4) Supply & Trading and (5) Coal / Nuclear. Segments (1) to (4) represent our core business. This is where we want to grow. In (5), we have pooled our German electricity generation from lignite, hard coal and nuclear fuel, which will lose importance due to exit roadmaps established by the state.
Our goal by 2040: RWE will become carbon neutral
As one of the world’s leading energy companies, we shoulder special responsibility for the implementation of the emission reduction targets in the energy sector. The European Union aims to be carbon neutral by 2050. Our objective is to achieve the same goal by 2040, and we have already made good progress on this path. We reduced our annual carbon dioxide emissions from electricity production by 62 % from 2012 to 2020. By 2030, we plan to have lowered them by at least 75 %. The phaseout of electricity generation from coal will play a central role. Further elements of our emissions reduction strategy are the rapid expansion of zero-carbon renewable energy, increased utilisation of storage technologies and the use of carbon-neutral fuel to produce electricity. In doing so, we are acting in line with the Paris climate goals, as recently confirmed by the Transition Pathway Initiative and the Science Based Targets initiative.
The new RWE: a world leading renewable energy company
The transaction with E.ON has turned us into a world-leading producer of electricity from renewable sources. We want to expand this business rapidly. By the end of 2020, we already had renewable energy assets with a total capacity of 10.8 GW, with 9.2 GW attributable to wind and 0.2 GW to photovoltaics. These figures reflect the generation capacity allocable to us on a prorated basis, i. e. in accordance with the stakes that we hold. In addition to existing assets, we have a wide portfolio of growth projects in various stages of development. Here again, the focus is on wind, followed by solar PV. On top of being environmentally friendly, renewable energy also enables stable and attractive returns. Electricity production from renewables is clearly already our strongest income generator. In the past fiscal year, it already accounted for about half of our adjusted EBITDA.
Fast growth in wind and solar power
We want to grow our wind and solar capacity to over 13 GW (pro-rata) by the end of 2022. We plan to make over €1.5 billion in net investments to this end every year. Reinvesting proceeds from sales of investments will actually cause the gross expenditure to be much higher. In August 2020, we expanded our financial headroom by increasing our capital by €2 billion.
Hydrogen: integral component of the energy transition
RWE intends to spur the expansion of the hydrogen economy, especially in Germany, the Netherlands, and the United Kingdom. In pursuit of this goal, we will work along the entire value chain, from green electricity generation and hydrogen production by electrolysis to hydrogen trading and storage and the conclusion of commercially optimised supply agreements with major industrial customers. In the last two years, we have forged numerous partnerships with businesses and research institutes seeking to co-operate with us to create nationwide hydrogen infrastructure.
Conventional electricity generation: growing significance of gas as a source of energy
Building the storage infrastructure required for a nationwide supply of green electricity is a task that will take decades, not years to accomplish. Therefore, power stations capable of offsetting fluctuating wind and solar power production will remain necessary for the foreseeable future. With our conventional generation capacity, we are making an indispensable contribution to the reliable and tailored supply of electricity in our core markets Germany, the Benelux region, and the United Kingdom. Our gas-fired power stations, most of which are state-of-the-art, are especially well suited to partner with renewable energy because they emit little carbon dioxide and can react quickly to load fluctuations in the grid. Another advantage of gas-fired power stations is that they can be retrofitted to run on zero-carbon fuel, e. g. green hydrogen.
Supply & Trading: commercial hub for the generation business
Energy trading is part of RWE’s core business. It forms the economic link between the elements of our value chain, the regional markets and the various energy commodities. It is overseen by the Group company RWE Supply & Trading, which focuses on trading electricity, gas, coal, oil, biomass, and CO2 certificates. Another of the Group company’s activities consists of marketing the electricity from RWE power stations and procuring the fuel and emission allowances required to produce it. The objective here is to limit price risks. On top of that, RWE Supply & Trading is in charge of the commercial optimisation of our power plant dispatch, the earnings of which go to our generation companies.
Attractive investment portfolio increases financial strength
RWE’s business operations are supplemented by a portfolio of investments in energy companies, which we believe will be a reliable source of substantial income. These are primarily the stakes in Amprion (25.1 %), KELAG (37.9 %) and E.ON (15 %). Our interest in E.ON is solely of financial importance to us. We are currently using this investment and our claim for compensation for the early exit from lignite against the federal government to fund the mining provisions.